Find What Hemingway current annual corporate tax liability

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Hemingway Corporation is considering expanding its operations to boost its income, but before making a final decision, it has asked you to calculate the corporate tax consequences of such a decision. Currently, Hemingway generates before-tax yearly income of $205,000 and has no debt outstanding. Expanding operations would allow Hemingway to increase before-tax yearly income to $347,000. Hemingway can use either cash reserves or debt to finance its expansion. If Hemingway uses debt, it will have a yearly interest expense of $65,000.

Question a. What is Hemingway's current annual corporate tax liability?

Question b. If Hemingway finances its expansion using cash reserves, what will be its new corporate tax liability?

Question c. If Hemingway finances its expansion using debt, what will be its new corporate tax liability?

Reference no: EM132610131

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